Federal Income Report Could Lead To Higher State Spending

A new statistical report issued Thursday in Washington may free the state government to spend an extra $30 million next fiscal year.

Talk about strength in numbers!

The report from the U.S. Bureau of Economic Analysis provides data on total personal income in every state as of June 30, 1993. It also contains revisions to figures in previous reports.

The numbers could lead to higher state spending next fiscal year because the total income of Connecticut residents is higher than was anticipated when the state budget was passed back in May.

The bureau's figure for the total annual income of all state residents was $92.8 billion -- about $900 million more than expected.

Because that number is one of several that go into the calculation of the state spending cap, its upward movement may translate into raising the spending cap for the 1994-95 fiscal year.

"They revise these figures all the time, which is one of the problems with the spending cap legislation," said Rep. Patrick J. Flaherty, D-Coventry, an assistant economist at Shawmut Bank in Hartford.

A move to recalculate the spending cap at a higher level is bound to be condemned by some politicians as fiscal trickery, but one of the cap's principal architects, Sen. William H. Nickerson, R-Greenwich, said it makes sense to update the cap when fresher numbers are available.

"I don't find anything sinful in that," Nickerson said. "If the numbers are such that there's a bump up in what's allowable under the spending cap, I say, fine. We'll all live long enough to see a cycle where the reverse happens, and the cap is diminished by fresh numbers, and we should live by that, too."

At least, said Flaherty, nobody can claim the numbers are being cooked by state officials with an ulterior motive.

"This is not like the state government releasing numbers to fudge it on the spending cap," he said. "This is the U.S. government, which couldn't care less if we have a spending cap or not."

The state uses the federal figures to calculate the average annual growth of personal income in Connecticut over the past five years. Whatever that percentage is, that's the most that the state budget is allowed to rise, except for spending in special categories such as aid to distressed cities.

In May, the legislature adopted budgets for 1993-94 and 1994-95 based upon the spending cap as calculated at the time. The cap was 5.8 percent in the first year and 4.5 percent in the second year, with the latter figure derived partly from estimates.

The data issued Thursday in Washington show that the cap for the 1994-95 fiscal year, starting next July, could be raised to 4.9 percent. That would allow the legislature to spend about $30 million more than if the cap stayed where it is.

The report also included some revisions to previously issued figures. If those changes had been made before May, the spending cap for the current fiscal year would have been 5.6 percent, or about $15 million below the cap as it was set at the time.

Nickerson said he would not advocate lowering the spending cap for this fiscal year, which will be more than half over when the legislature convenes in February.

Flaherty said one reason that old numbers often change is that the basic data source is federal income-tax returns, which can be filed late and are subject to amendment.

The new figures show that income in Connecticut rose 1.9 percent in the 1991-92 fiscal year, not 2.4 percent as previously reported. The figure for the 1990-91 fiscal year also dropped, from 3.9 percent to 3.3 percent.

The situation was reversed for the 1992-93 fiscal year, when income rose by 6 percent instead of the 2.8 percent estimated in May.

That 6 percent, if it replaced the 2.8 percent figure in the spending-cap formula, would raise the cap by four-tenths of a percentage point for the 1994-95 budget.

Last week, the governor's fiscal office predicted that the budget would grow beyond the spending cap by more than $100 million unless the legislature makes cuts in some discretionary programs.

If that projection is accurate, a change in the spending cap could reduce the needed cuts to about $70 million